Correlation Between Mesirow Financial and M Large

Can any of the company-specific risk be diversified away by investing in both Mesirow Financial and M Large at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Mesirow Financial and M Large into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mesirow Financial Small and M Large Cap, you can compare the effects of market volatilities on Mesirow Financial and M Large and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Mesirow Financial with a short position of M Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mesirow Financial and M Large.

Diversification Opportunities for Mesirow Financial and M Large

0.69

Correlation Coefficient

Mesirow Financial  M Large

Poor diversification

The 3 months correlation between Mesirow and MTCGX is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mesirow Financial Small and M Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Large Cap and Mesirow Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Mesirow Financial Small are associated (or correlated) with M Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Large Cap has no effect on the direction of Mesirow Financial i.e., Mesirow Financial and M Large go up and down completely randomly.

Pair Corralation between Mesirow Financial and M Large

Assuming the 90 days horizon Mesirow Financial Small is expected to under-perform the M Large. In addition to that, Mesirow Financial is 2.4 times more volatile than M Large Cap. It trades about -0.18 of its total potential returns per unit of risk. M Large Cap is currently generating about -0.01 per unit of volatility. If you would invest  3,657  in M Large Cap on September 20, 2024 and sell it today you would lose (11.00) from holding M Large Cap or give up 0.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Mesirow Financial Small  vs.  M Large Cap

Mesirow Financial Small

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Mesirow Financial Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

M Large Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in M Large Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, M Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mesirow Financial and M Large

The main advantage of trading using opposite Mesirow Financial and M Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesirow Financial position performs unexpectedly, M Large can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in M Large will offset losses from the drop in M Large's long position.

The idea behind Mesirow Financial Small and M Large Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.